For the first time in at least four years, state lawmakers are introducing plans to create new and permanent sources of funding for a cash-strapped state agency tasked with fulfilling a century-old mandate to house Native Hawaiians.

Those measures include higher taxes on the sale of luxury homes as well as new taxes on rental cars. Efforts to fund geothermal exploration for the state Department of Hawaiian Home Lands are also in the works this session. If geothermal stations are built on its lands, the agency would reap royalties from power generation.

The department received a $600 million influx of cash four years ago, but it has already allocated those funds and would require billions of dollars more to clear its waitlist of nearly 30,000 applicants.

The Department of Hawaiian Home Lands had proposed raising the state’s tourist tax to create a permanent revenue stream for the agency, but failed to get the backing of lawmakers or the governor for the idea. Such a move would have been unpopular with the tourism industry and would have been the second time in two years that lawmakers eyed an increase to the Transient Accommodations Tax.

The department has long been criticized for its slow pace of developing homesteads. It has issued just over 10,000 leases since its creation and currently has a waitlist of nearly 30,000 applicants.

That criticism is irksome to people like Rep. Darius Kila, who said the department can’t move forward without more funding from the Legislature that has historically shortchanged the department.

Kila introduced a bill this session to tax the sale of fleet vehicles to rental car companies and direct the revenues to DHHL. 

Rental companies avoid paying the state’s general excise tax when they purchase vehicles from manufacturers under an exemption in state law for wholesalers. Based on state data from 2024, closing that tax loophole could generate upwards of $80 million in annual revenue that could go to Hawaiian homelands, according to Kila.

The bill also funds one additional position in the state tax department to investigate federal contractors who may be skirting tax payments in the hopes of finding additional tax revenue.

A Senate committee plans to hear a companion bill on Friday.

Higher Tax On Luxury Homes

Another large revenue generator for the department proposed this year is a tax increase on the sales of homes valued at $2 million or more. If the increase passes, it could raise a total of more than $172 million annually.

The measure, House Bill 2049, would allocate up to $60 million a year to DHHL from the home sales tax, known as the conveyance tax. It would also allocate up to $80 million a year to state programs that develop affordable and rental housing.

Rep. Luke Evslin, who chaired a committee of lawmakers who monitored how the department spent the $600 million allocated four years ago, introduced the bill.

“Ideologically, it seems straightforward that a percent of every land transaction goes to the Department of Hawaiian Home Lands,” he said.

Evslin said the bill would also seek to remedy the major increases in payments between tax brackets that are present in the current scheme.

For example, the conveyance tax on the sale of a home valued at $999,999 is currently under $2,000. A home valued at just a dollar more, $1 million, can be assessed as much as $3,000.

Two years ago, a proposal from Green to raise the conveyance tax died in the Senate after Realtors and other groups raised concerns that raising the tax would increase housing costs for residents.

Evslin said his bill actually lowers the conveyance taxes on the sale of homes valued at less than $2 million. The median price of a home on Oʻahu is about $1.1 million.

“We wanted to have no impact or reduce taxes for the majority of local taxpayers buying a home,” Evslin said, adding that the intended targets for the tax increases are high-priced homes and those that aren’t occupied year-round by their owners.

Evslin said the state’s tight budget forecast and uncertainty over federal funding could improve the chances HB 2049 clears the Legislature over the governor’s proposal two years ago. Lawmakers are generally reluctant to raise taxes.

“But this is a different year,” Evslin said. “The state needs money.”

The bill has its first hearing on Friday.

Funding For Geothermal Advances

On Tuesday, lawmakers also advanced HB 1982 to fund geothermal exploration on DHHL lands. 

The bill would allow the department to hire consultants, collect data and conduct slim-hole drilling, where researchers dig holes of 6-inches in diameter to search for water and heat sources that are necessary to build geothermal power plants.

There would be no geothermal development yet; that would come after the exploration is complete. The department wants to eventually pursue geothermal power on its lands because royalties generated from the sale of electricity from such projects could result in substantial revenues for the department.

But it’s for that reason, among others, that some opposed the measure during a hearing before the House Energy and Environmental Protection Committee.

“They’re pimping our lands for money,” said Terri Napeahi, who lives on DHHL land in Keaukaha and took the day off from work to fly from the Big Island to testify at the State Capitol.

The measure passed despite testimony from Napeahi and other Hawaiʻi island residents who have long opposed geothermal development because of what they say are the adverse health impacts they’ve experienced from living near the Puna Geothermal Venture plant. 

Many in the area also believe that the Kīlauea volcano, on which the PGV plant sits, is home to the goddess Pele, and tapping into its heat sources has been seen as a desecration of her domain.

The department plans to explore sites across the state. On the Big Island, that includes its lands in Humuʻula and upper Piʻihonua, Puʻukapu, Kawaihae and South Point; on Maui, at Kahikinui and Hāna; on Molokaʻi in Hoʻolehua; on Oʻahu near Lualualei, as well as in Waimānalo, Haʻikū and Waiāhole; and on Kauaʻi in Wailua.

The bill, which was introduced at DHHL’s request, would provide $5 million, which would cover survey work at those sites. However, it would cost up to $50 million to do slim-hole drilling at just six of those sites, according to DHHL’s testimony.

The agency plans to hold informational briefings for its beneficiaries on its geothermal exploration program beginning in April.

Another geothermal measure would also put funding toward similar studies by the state energy office.

The House Environmental Protection Committee advanced the bill without specifying a funding amount for the exploration activities. 

Also on Tuesday, the Senate Hawaiian Affairs Committee passed a measure that would direct an unspecified portion of the state’s new Green Fee to fund dozens of climate and wildfire mitigation projects on Hawaiian homelands. The governor has issued a separate list of projects, but lawmakers will ultimately decide which efforts receive funding.

The same committee also advanced a measure to fund irrigation system improvements across the department’s lands on Molokaʻi. Both of those bills will need to clear the Senate Ways and Means Committee to stay alive this session.